3of5Pumping units draw from a well in Texas' Eagle Ford Shale, where a new government report predicts daily production will drop by almost 70,950 barrels next month.. (Carrizo Oil & Gas photo)Photo: Carrizo Oil & Gas

4of5In this June 18, 2012 file photo, Rep. Ed Markey, D-Mass., now-Senator-elect, speaks on Capitol Hill in Washington. In the era of intense government surveillance and secret court orders, a murky multimillion-dollar market has emerged. Paid for by U.S. tax dollars, but with little public scrutiny, surveillance fees charged in secret by technology and phone companies can vary wildly. In its letter to Markey, AT&T estimated that it collected $24 million in government reimbursements between 2007 and 2011. Verizon, which had the highest fees but says it doesnât charge in every case, reported a similar amount, collecting between $3 million and $5 million a year during the same period. (AP Photo/J. Scott Applewhite, File)Photo: J. Scott Applewhite, STF

5of5Unlike unprocessed crude, companies can freely sell gasoline, diesel and other petroleum products from the United States overseas.

WASHINGTON - The Obama administration has cleared the way for two energy companies to sell an ultra-light hydrocarbon overseas after minimally processing it, a decision that tests the limits of a long-standing ban on exporting U.S. crude.

The move, which came in private orders issued by the Commerce Department's Bureau of Industry and Security, effectively confirms that the hydrocarbon known as condensate qualifies as a petroleum product once it has been processed in a distillation tower, and therefore is not barred by the 39-year-old ban on crude exports.

The decision falls far short of what oil producers and some of their allies in Congress have been urging - including a wholesale repeal of the trade limits on crude. And because the classification ruling is limited to condensate that has been run through a distillation tower, it does not apply more broadly to unprocessed condensate that has just flowed out of oil and gas wells.

Distillation involves using heat and condensation to separate hydrocarbons into their different streams. That generally goes beyond simply stabilizing condensate for pipeline transport by boiling off butane and other light gases.

The classification rulings for Pioneer Natural Resources and Enterprise Product Partners, first reported by the Wall Street Journal, were confirmed by an energy industry lobbyist and congressional staff.

A Pioneer spokesman said the company was preparing a statement.

An Enterprise Product Partners spokesman acknowledged a reporter's question but did not immediately have a response.

The decision does not change the decades-old regulations that effectively block most crude from crossing U.S. borders, but it is expected to embolden other oil companies to follow suit. And it could provide a new avenue for the ultra-light condensate that flows along with crude out of many Texas wells tapping the Eagle Ford Formation.

"There has been no change in policy on crude oil exports," stressed Department of Commerce spokesman Jim Hock.

"Consistent with the regulatory definition, crude oil that has been processed through a distillation tower which results in the crude becoming a petroleum product is no longer defined as crude oil," Hock said. "Petroleum product can be exported without a license, except in very limited circumstances."

A legal guarantee

The bureau classification orders issued to Pioneer and Enterprise are technically not needed to export refined petroleum products, but they provide a legal guarantee and assurance for companies that want to ensure they are not running afoul of U.S. trade law.

That kind of legal protection may be especially valuable for first-moving companies testing the limits of the crude export ban.

Sen. Lisa Murkowski, R-Alaska, who has called for broad crude export sales, praised the move but said more needs to be done to ensure a global marketplace for the surging production of light, sweet crude from U.S. wells.

"Commerce's decision to allow companies to process condensate and export the resulting products is a reasonable first step that reflects the new reality of our energy landscape," Murkowski said. "The rules remain outdated, nonetheless, and should be modernized. I continue to urge the administration to fully lift the ban on crude oil and condensate exports."

Murkowski also has urged the administration to affirmatively rule that all condensate - whether or not it has been processed in a distillation tower - can be freely exported.

An American Petroleum Institute spokesman said "allowing export of processed condensate would be a very small step toward a much more important goal, which is free trade."

The spokesman added, "We're pleased the administration is paying attention to the issue and urge policymakers to fully lift the restrictions that are limiting America's potential as an energy superpower."

Although condensate is more like gasoline than crude, it has historically been swept under the oil export ban - at least as long as the light hydrocarbon is coming out of oil and gas wells. Under current regulations, condensate can be freely exported if it is produced at gas processing plants, qualifying it as a petroleum product.

Defining condensate

There is widespread disagreement - even within the industry - on how to define condensate. The ultra-light hydrocarbon generally flows as a liquid at normal temperatures even if it is a gas underground.

Because of the varying definitions, it is unclear how much condensate is produced inside the United States.

The government's Energy Information Administration said about 250,000 barrels of condensate were extracted per day in 2012, but production has surged, and experts now say it is more than 1 million barrels daily.

The EIA just launched studies looking more closely at domestic condensate production and other issues tied into the broader debate over crude exports.

Because of the amount of condensate flowing from the Eagle Ford - and its proximity to distillation equipment and ports along the Gulf Coast - the BIS ruling could help open the gate for more Texas condensate, once processed, to be sold overseas.

'Keep our resources'

Sen. Ed Markey, D-Mass., who opposes oil exports, said the Commerce Department's decision "puts America on a slippery slope to send more of our oil abroad, even at a time when the Middle East is in disarray and tensions are running high with Russia."

"We should keep our resources here at home for American families and businesses, not send this oil abroad even as we import oil from dangerous regions of the world," he said in a statement.

39-year-old ban

Some producers have been pushing the Obama administration and Congress to lift the 39-year-old ban on exports, insisting the change is needed because U.S. refineries are geared more toward heavy crudes, instead of the light, sweet variety increasingly flowing out of domestic wells.

But refiners say they have already made changes to accommodate U.S. light sweet crude - including reducing imports of the fossil fuel - and can take further steps to use more of the U.S. oil.

The existing ban has some exceptions for sales to Canada, some Californian crude and Alaskan oil.